Wednesday, March 27, 2013 12:35 pm

Turkish Cypriots: Crisis could delay settlement

By ELENA BECATOROSAssociated Press

Cyprus' financial woes may further delay prospects for a settlement to the island's nearly 40-year ethnic division, the leader of the breakaway Turkish Cypriots said Wednesday.

With all attention focused on pulling Cyprus out of its economic quagmire, the new Greek Cypriot president, Nicos Anastasiades, might have less time to devote to restarting stalled peace talks, Dervis Eroglu told The Associated Press in an interview in his office in northern Nicosia. His spokesman acted as an interpreter.

Cyprus has been split by a jagged militarized border into a Greek Cypriot south and a Turkish Cypriot north since 1974, when Turkey invaded after a coup sparked by an attempt to unite the island with Greece. The breakaway state declared by Turkish Cypriots is recognized only by Turkey, which maintains about 35,000 troops there. The island in the eastern Mediterranean is represented internationally by the Greek Cypriot government, which Turkey doesn't recognize.

The south enjoyed burgeoning growth for years, joined the European Union and adopted the bloc's joint euro currency. But, with an economy based on an oversized banking sector, it has fallen on dramatically hard times. Overexposed to toxic Greek debt, the country's banks tottered, and its government agreed Monday to an international bailout - but must raise billions of euros on its own.

Banks across the south were shut down March 16 to prevent people from draining their savings after an initial plan aimed to seize up to 10 percent of deposits to help pay for the bailout of the south. Greek Cypriot lawmakers rejected that plan. Under the new deal, Cyprus agreed to slash its oversized banking sector and inflict hefty losses on depositors at two banks.

"The fact that our southern neighbors have gone into this kind of crisis does not please us," Eroglu said. "This may be one of the factors that is likely to delay a settlement. It may also force our good friend Mr. Anastasiades to spend all his energy on economic problems and have less time to devote to the negotiation process."

Eroglu said he hoped Anastasiades' government "will be able to get out of this crisis soon, and that his citizens will not suffer as a result of these problems."

Anastasiades was elected little more than a month ago, after a campaign in which economic issues dominated over the issue of the island's division for the first time in decades.

Peace talks have frequently faltered over the decades, and are currently stalled. Hopes that a solution was near in 2004 were dashed after Greek Cypriots rejected a peace plan brokered by then-U.N. Secretary General Kofi Annan. Turkish Cypriots had accepted the plan in a separate vote.

Eroglu, elected as head of the Turkish Cypriots in 2010, said the crisis in the south might renew wishes to seek a solution.

"I am hoping and I am thinking that in view of the developing economic circumstances and problems that the south is facing, there will emerge perhaps a greater desire for a settlement," he said. "We are wishing that this crisis will not last very long and that the confidence of the Greek Cypriot people will not diminish, because if there is a weakening of the trust that the people have in the new leader, then it will be more difficult for that leader to come to a solution with the Turkish Cypriot side."

Without international recognition, the breakaway northern Cypriot state suffered years through decades of economic isolation, dependent almost entirely on Turkey. While the euro is the currency in the south, the north uses the Turkish lira - although most shops and cafes in old Nicosia also accept euros.

A decade ago, Turkish Cypriots estimated it would take about 18 years for their economy to catch up with that of the south.

"But that was then," Eroglu said. "Now the situation is different. The Greek Cypriot economy is in worst shape than ours."

He said any new plan to reunite the two sides of the island would have to re-examine how far economic integration would go.

The Greek Cypriots "believed until lately that entering the European union, becoming a member of the European union, would solve all their problems. But now, as you can see, this is not the answer to all their problems," the Turkish Cypriot leader said.

The south is now "just beginning" to experience economic problems.

"In view of the developments," he said, "I am thinking and hoping that a new will for a settlement will also emerge on the Greek Cypriot side."